Businesses in South Africa are buckling under load shedding – as liquidations climb

 ·22 May 2023

Stats SA has published the latest liquidation statistics for businesses in South Africa, showing that 523 companies have shut their doors in the country to date.

The stats body showed that 112 businesses were liquidated in April 2023, 99 on a voluntary basis and 13 on a compulsory basis.

This adds to the 168 businesses that were liquidated in March, taking the total for the year to 523.

Finance, insurance, real estate and business services were the most heavily affected industry for the fourth consecutive month this year, with a total of 204 since January 2023, including the 45 liquidations in April alone.

Unclassified industries followed suit with 26 liquidations, while the trade, catering and accommodation industry further reported 24 liquidations in April.

The electricity, gas and water industry, the agriculture, hunting and forestry industries, and the Mining and quarrying industry were the only listed industries with no liquidations.

Small and medium-sized businesses (SMEs) in South Africa are getting hammered by load shedding, and almost all of them have suffered a loss of revenue and production, among other things, due to the power cuts.

The impact of load shedding on SMEs came from a recent parliamentary Q&A, where the minister of Small Business Development was asked whether her department has assessed the impact of electricity blackouts on small businesses.

Minister Stella Ndabeni-Abrahams responded by citing a research study conducted by the Small Enterprise Finance Agency (Sefa) in August 2022, which found that SMEs suffer significantly due to load shedding.

This study was commissioned to survey 1,500 Sefa clients; however, only 214 responded.

Most respondents operated in manufacturing, retail trade, hotels and restaurants, construction, transport, community services, financial services, agriculture, mining and quarrying.

Some of the findings identified were:

  • All respondents suffered a loss of revenue and production due to load shedding;
  • 76% of respondents indicated that they still don’t have alternative power in place to mitigate the effect of load shedding;
  • To cope with the impact of load shedding, most respondents indicated that they utilised the load shedding schedule to plan their business operations and have reduced their production;
  • The majority indicated that they require assistance with funding to acquire alternative energy sources and help with restructuring their loans in respect of their loan repayment obligation with the agency; and
  • The majority of these businesses were in operation for 1 to 5 years.

Additionally, several business stakeholders have noted that rampant and escalated load shedding resulted in irregular wage expenses, as many businesses have had to rely on casual workers to coincide with the inconsistent load shedding schedules.

Considering 2023 has been the worst year of load shedding to date so far – and the fact the study was conducted in August 20222 – SMEs are likely facing even more challenging economic conditions.

What’s being done

Ndabeni-Abrahams said the department had noted the challenges SMEs are facing amid intensifying load shedding, and it is in consultations to address these challenges.

“The DSBD and its agencies are looking at a three-pronged approach for supporting SMMEs and Co-operatives affected by load shedding,” she said.

These include:

  •  The Power Purchase Product (PPP) is an immediate relief for formal and informal enterprises (alternative power sources). It is an initiative of the Small Business Development Portfolio (DSBD, Seda and Sefa) to support SMMEs with alternative energy-generating equipment (generators and Photovoltaic installations – PV). The programme will be implemented via the existing programme structures as follows:
    • Informal business to be supported via DSBD’s Informal and Micro Enterprise Development Programme (IMEDP).
    • Micro businesses to be supported through Seda’s Asset Assist Programme
    • Small to Medium enterprises to be supported through Sefa’s Township and Rural Entrepreneurship Programme (TREP).
  • Guarantee programme via the Bounce Back Scheme administered by Khula Credit Guarantee (KCG) on behalf of the government. This medium to long-term intervention still requires intense discussion with relevant parties, including the National Treasury, which is the scheme’s custodian.
    • Ongoing discussions with National Treasury indicate their interest and consideration of opening up the bounce-back scheme to all Development Finance Institutions.
  • Consultation with various stakeholders for a broader offering (key focus on promoting innovative ideas).
    • Ongoing consultations with various departments and relevant agencies to work together to develop long-term and sustainable energy supply solutions.

The department is currently awaiting endorsement from National Treasury before all these schemes can be implemented, added Ndabeni-Abrahams.

Read: Business sounds the alarm on stage 8 load shedding

Show comments
Subscribe to our daily newsletter